What do 1980, 1989 and 2003 have in common? They were the peak sales years for LPs, cassettes and CDs respectively. After that, a very slight resurgence in vinyl aside, it was all downhill.
Billboard magazine has an interesting piece in which they suggest that perhaps 2012 might join that list – as the year that saw peak sales for music downloads, with streaming services like Spotify, Rdio and now, of course, iTunes Radio the heir apparent …
The fall in music downloads is small so far, but the numbers do seem suggestive of a trend.
Digital purchases are down almost across the board this year. Track sales are down 4.4% through Nov. 24, according to Nielsen SoundScan. Track-equivalent albums, where 10 tracks equal one album, are down 2.1%. Total digital purchases — tracks and digital albums — are down 4%.
Track sales have been falling all year. In the first half of 2013, U.S. consumers bought between 23 million and 25 million tracks per week. In October and November, weekly track sales dropped below 20 million.
A piece in the NY Times quotes Doug Morris, chairman of Sony Music Entertainment, as seeing the same pattern.
The buying habits of music lovers are changing. Rather than buying physical records, or even digital downloads, consumers are starting to prefer buying music on demand from streaming services.”
In the same piece, Neilsen says that YouTube music videos are the most popular source of music among younger listeners.
Billboard points to catalog sales – everything other than new releases – as a key indicator of the state of the nation for a music format.
The current weakness in catalog sales mimics what happened with CDs, according to NPD Group analyst Russ Crupnick, who says consumers began showing “apathy” about CD purchases roughly eight to nine years ago. “People were starting to say, ‘I’m good. I have all the catalog I want. If you don’t ‘wow’ me with something new, I’m going to stay on the sidelines.’”
The big question being asked of the streaming services, of course, is whether their business model is sustainable. Of the 24M users Spotify reported back in March (the last time it talked numbers), only a quarter of them had paid subscriptions. Music downloads and physical media sales are still where the money is so far – generating $5.6B revenue against around $1B for streaming services – but that’s a pretty rapid shift for a format that, until recently, appeared to be much better at attracting listeners than parting them from their cash.
But if anyone is well-placed to make money from streaming music, it has to be the company which turned a break-even service designed to promote hardware sales into a multi-billion dollar business in its own right. Apple’s move into the streaming music business is looking like it was particularly well-timed.